Gray divorce is defined as a divorce or separation that occurs later in life, typically at age 50 or beyond. Studies have shown that divorce rates for those aged 65 and older have tripled since 1990.
This phenomenon often involves financial challenges far greater than those in earlier-life divorces. In general, there are often more assets to consider, but one in particular is life insurance. Life Insurance policies are valuable financial assets, not just protection vehicles, and should be valued as part of the asset review in divorce.
Is the coverage still needed?
If one spouse still needs income protection, or if the policy is intended to secure support obligations, such as alimony, pension sharing, or maintenance, the policy may still be essential.
Is the insured still insurable?
In cases of gray divorce, health changes may be a factor to consider. If the insured is now uninsurable, the existing policy may be even more valuable to keep.
If it is determined that the policy should remain in force, the divorce settlement should outline policy ownership, premium obligations, and beneficiary designations.
Does the original policy need to be replaced?
In some scenarios, ownership and beneficiary structures become unworkable in divorce, generally when spouses do not want to retain any financial ties. In these cases, new separate policies might replace joint or survivorship policies.
Life insurance should be valued before lapse, surrender, or any material changes are made to the policy.
Does the policy have value over cash/surrender value?
In situations of replacement or where there is no longer an economic need, neither spouse wishes to keep paying premiums, or the policy is underfunded, it may be decided to cancel the existing policy. Before the policy is lapsed, surrendered, or materially changed, it should be reviewed for fair market value.
Especially in gray divorce, because the insured(s) are older and may have health issues, the policy may have significant value over the cash/surrender value if sold as a life settlement.
A life settlement is the sale of an existing life insurance policy for more than the cash value and less than the death benefit. All types of Universal Life and Convertible Term policies are very attractive to institutional buyers in the secondary market.
In 2022, life settlements generated 5x more than the cash surrender value on average.
Selling a life insurance policy should be explored when the need for coverage no longer exists, a life settlement can generate more than the cash value, or funds are needed for current financial needs.
Representation is essential when considering a life settlement. Many resources advertising on TV are direct buyers looking to purchase the policy for the least amount possible. To guarantee the best offer, work with an independent, sell-side advisory firm whose fiduciary duty is to the policy owner.
Ashar Group is a nationally licensed life settlement firm that protects the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, manage assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients, specializing in life insurance valuation for planning purposes.
get a secondary opinion®
As a trusted advisor, have you discussed alternative ways to fund long-term care (LTC) for your clients or their loved ones? With an aging population, the harsh reality is that a majority of Americans will need long-term care, assisted living, or homecare. Many clients in their 50-60’s cannot prepare for their own future as they’re forced to pay for the caregiving needs of their parents. Proactive decisions are pushed off and the cycle repeats itself.
Due to this unintentional, yet highly dangerous lack of planning, many families are unknowingly causing financial and emotional devastation to the multigenerational families for whom they care deeply. It is far to common for a client to call their advisor when they have an immediate long-term care need. At that point it’s typically too late. Failing to plan is planning to fail. At this point, they cannot qualify for long-term care insurance.
So what are the options? Why not try leveraging a Life Settlement to accomplish the goal?
By appraising and monetizing your client’s life insurance policy, you can enable clients to help fund their long-term care expenses and help give them find peace of mind. This frees up liquidity for the entire family which enables them to put the proper financial plan in place therefore allowing them to focus on what’s important, their family. For more information on funding Long Term Care through a Life Settlement, visit us at ashargroup.com.
Prior to the emergence of the Secondary Market, advisors had few options to offer clients when they were deciding whether to surrender or lapse a policy. Fortunately, the Ashar Group offers advisors a free online tool called the Policy Value Quiz. It is designed to help you determine in a timely manner if your client’s policy could qualify for a Secondary Market solution. This can be a terrific way to ensure that your client is not “leaving money on the table,” prior to surrendering or lapsing a life insurance policy for it’s cash surrender value. It can position you as the innovative advisor that assisted the client in generating short-term liquidity to fund lifestyle and healthcare needs.
Once you’ve qualified a policy and want to learn more, you can partner with Ashar Group as your Secondary Market resource to learn more about how to serve your clients, discuss this life-changing solution with your professional network that can impact your bottom line in a positive way. Ashar has developed a proprietary tool, our Advisor Resource Center. Here you’ll find valuable tools and case studies for reference. It also includes training videos that will guide you through the process and help you better understand the life settlement market. Learn the answers to many of the complex questions that could come up in your discussions. It all starts with education and training, to provide you the support you need to uncover new opportunities for your clients and business.
If you have any questions about these resources that need further clarification, please email us at ashargroup.com or call us at 800.384.8080. We’re here to help.
